Ares Capital looks riskier because of PIK interest and equity bets
Updated
Updated · Barron's · May 6
Ares Capital looks riskier because of PIK interest and equity bets
7 articles · Updated · Barron's · May 6
The $30bn fund booked nearly $490m of noncash PIK interest and dividends in 2025, 34% of net investment income, while only 60% of its portfolio was first-lien loans.
Without noncash PIK, cash interest and dividends after expenses were $930m last year against $1.26bn of dividends, though Ares says collections, gains and deferred PIK repayments fully covered payouts.
Ares has delivered 12% annualised returns since 2004 and maintained or raised its dividend for 17 years, but analysts warn weaker lending conditions could expose its heavier use of junior debt, equity and PIK.
Is Ares Capital’s high dividend a reliable cash stream or a ticking time bomb built on non-cash profits?
With market defaults rising, is Ares Capital’s risky lending strategy a genius move or a disaster waiting to happen?